It’s time to engage economic recovery gear

Has Kenya ever had an incompetent government like the current one? Was the Moi regime this incompetent?” That is the question that comes up in conversations when concerned Kenyans reach out asking what exactly is happening to the economy.

The fact that we are now comparing our current economic predicament to that of the Moi administration, considered our bottom-barrel moment, should tell government defenders whether we have progressed or retrogressed.

Truth is, Kenyan economy is contracting fast but the President and his team believe that what we need to fix is our politics. Is government intentionally diverting attention away from the economy? Let government not bamboozle itself, when the economy tanks those political fixes will be like the red flags matadors’ wave to the charging bulls in a rodeo

Last week, the Daily Nation carried a story about how the Treasury has allegedly been cooking figures to portray that the economy is on the right trajectory when the opposite was the reality.

These are facts some of us have been highlighting but what is surprising is that that revelation should inspire Treasury to work on getting things back on track but it doesn’t look so.

We start with debt crisis, as at September 2019 our public and publicly guaranteed stock of debt amounted to Sh5.96 trillion which is 63.9 percent of GDP weighted on nominal GDP of Sh9.32 trillion as at June 2019.

At end of October we crossed the Sh6 trillion mark meaning the debt to GDP was at 64 percent but Treasury CS three weeks ago told Parliament that our public debt to GDP is 61 percent. This fiscal year 2019/2020, the government intends to borrow Sh308 billion locally and Sh331 billion externally.

But the devil is in the details. In the supplementary estimates the Treasury tabled in Parliament there is Sh146.3 billion that the Treasury has not indicated where they will source the finances. With tax revenue underperforming, part of that amount will be financed through borrowing.

In short, government will not be borrowing Sh639 billion but more, so our debt-to-GDP at the end of this fiscal year in June 2020 will most likely be around 66-68percent.

Let us move to tax collection. Kenya is known to have one of the highest tax revenue-to-GDP ratio always standing at 18 percent, and even peaked 19 percent in 2013/2014. Despite having economic growth of 6.3 percent in the last fiscal year portraying an economic boom, tax collection to GDP fell to its lowest.

In the last fiscal year 2018/2019, Exchequer revenue collected was Sh1.477 trillion (15.8 percent tax-to-GDP) if we are to include the agency fee collected on behalf of other govt agencies which is Sh103 billion, its 16.7 percent.

Next is expenditure, if government collects the same Sh1.58 trillion in taxes, three items, debt servicing, pensions and public salaries exhaust the total collection leaving counties, national ministries and the other intuitions without funding.

Now, we are already seeing the Treasury bringing in supplementary budgets on the account of underperformance in tax collection, but the irony is that Treasury has instead increased the overall budget by Sh80.1 billion. Treasury with its usual games has reduced the approved estimates of Parliament from Sh40 billion to Sh35 billion and Judiciary from 19billion to Sh16 billion citing underperformance of tax collection and increased national government’s budget from Sh1.866 trillion to Sh1.956 trillion.

The President himself talks about austerity measures when State House is one of the entities having budget increased by an additional Sh131.79 million, the Ministry of Interior getting an additional Sh500 billion and Ministry of Devolution always plagued with corruption allegations getting an additional Sh 982 million for an item described as “special initiatives”

All this juggling the Treasury is doing is to rearrange the decks in the Titanic. It’s time to hit the panic button and engage the recovery gear. If every arm of government is taking a haircut, Parliament taking 12 percent and Judiciary 15 percent why not the national government, a 15 percent cut of national government budget saves us Sh300billion and that is where to start the recovery.